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Airbnb Inc. will begin automatically reporting renter income to the Danish tax authority “so everyone pays the correct tax,” according to a May 17 announcement.
The agreement is the first of its kind, according to the announcement from the Danish Ministry of Taxation.
The government wants a “thriving sharing economy in Denmark,” Tax Minister Karsten Lauritzen said in a statement. “However, it is a prerequisite that there is a piece of control. Therefore, the good news is that it has managed to cooperate with the Airbnb, which means reporting all revenue to the tax administration and thus settling the right tax.”
The agreement is the latest example of countries trying to properly tax the burgeoning sharing economy. The Organization for Economic Cooperation and Development raised sharing economy taxation as a challenge in its March report on the digital economy.
“The proposed rules make it clear that Danes are free to share their homes with guests and will help make income tax simple for everyone,” Airbnb said in a March 17 statement. The company had more than 30,000 renters in Denmark in 2017, according to the statement.
The deal with Airbnb is part of a broader agreement between the Danish People’s Party, Social Democrats, and the Danish Social Liberal Party to set more attractive tax terms for the sharing economy.
In return, the government increased the base deduction for renting homes from 21,900 kroner ($3,471) to 40,000 kroner per year. It also set at 28,000 kroner a flat-rate deduction for renting full-year housing. Only 60 percent of income that exceeds the basic deduction will be taxed as capital income, the government said.
The flat deductions are dependent on the rental website or rental agency reporting the tenant’s full rental income to tax authorities, the government said.
The Danish Parliament will discuss and vote on the proposal in the coming months.
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